Tesco’s HR team will face significant change management challenges following chief executive Terry Leahy’s retirement, according to experts.
Leahy has been at the helm of the UK’s largest supermarket chain for more than 13 years and was the mastermind behind its rise to own a 30% of the UK market. He will step down in March 2011 at the age of 55 and be succeeded by current head of international operations and IT, Philip Clarke.
Clarke will bring his own brand of leadership to the 500,000 staff worldwide, with 250,000 in the UK across almost 2,500 stores.
Tesco, which made a pre-tax profit of £3.2bn in its last financial year, saw its shares drop 2.4% following the announcement, but it is not just investors who are liable to wobble at the end of such a long and successful tenure, experts warned.
Angela Baron, employee engagement adviser at the Chartered Institute of Personnel and Development, said: “Effective succession planning is critical, especially if the person is strongly associated with the brand. There needs to be an effective handover. Obviously, the new chief executive will want to assert himself but there should be a reflective period. It’s a tricky role for a successor.”
Managing board members who missed out on the top job will be one of the major challenges, Baron predicted.
“Team coaching for the board can help,” she said. “Research has shown that cohesiveness of the top team is important. Even if there had been a power struggle, you would hope they could regroup and re-gel, because infighting within the top team is really damaging.”
This point was echoed by Michael Rendell, partner and head of HR services at professional services firm PricewaterhouseCoopers.
“Even with big changes at the top, there’s always a little bit of the changing of the guard, and HR must be a good, strong coach to all those individuals who, alongside the winners, don’t get the position they deserve,” he said. “HR must manage expectations, support line managers and act appropriately at all times.”
The key for any HR department dealing with the departure of a charismatic chief executive is communication, according to Rendell.
“A chief executive leaving any organisation creates huge expectation about change. It can be positive but also unsettling,” he said. “It’s important the HR teams communicate clearly what they might do. A period of silence, however benign, is the worst thing to do. At every level, HR must be upfront.”
While the HR function is not represented at board level at Tesco, Baron said the retailer has “some very good practices” covering customer service, staff recruitment and retention.
“There are people at the top who are aware of the personnel issues and give full support to the HR function,” she added.